ISoft surges after meeting deadline, securing cash

Vodafone climbs after agreeing sale of Proximus stake to Belgacom

By

SimonKennedy

LONDON (MarketWatch) -- Shares in medical-software developer iSoft Group soared as much as 61% Friday after the company, which is facing an accounting probe, met a deadline for publishing its results and said it has managed to secure new financing arrangements.

Trading in iSoft (IOT), which swung to a full-year loss of 382 million pounds ($723 million) from a profit of 5.9 million pounds in 2005, could have been suspended for exceeding the 120-day reporting deadline if the firm had not published its results Friday.

ISoft said it had secured new financing arrangements with a consortium of banks, although the cost of borrowing has increased and it will pay an upfront fee of 1.2 million pounds. It also announced a 153 million-pound contract win from Computer Sciences Corp.

Analysts had questioned whether the company would be able to secure further financing and said there would be little value remaining for shareholders if it couldn't. See archived story.

Shares in iSoft ended with a gain of early 32%.

Prior to Friday, iSoft's stock had lost almost 90% of its value since the start of the year.

The company has been hit by a string of profit warnings and accounting issues this year related to delays in its work to upgrade the U.K. National Health Service's computer systems and possible irregularities over how it has accounted for revenue.

Rajeev Bahl, an analyst at Deutsche Bank, said the terms of the refinancing were "much more favorable" than he had expected and the results were also slightly better than expected.

"That said, the numbers have not been signed off by iSoft's auditors as 'true and fair' so we will need to pay close attention to the accounting methods being applied," he added.

"Risks clearly remain and we would be cautious of extrapolating too much good news into the longer term," he added. "The group's position to win international business has been eroded by the well publicized NHS issues."

Gains for miners including Xstrata (XTA) and banks including Barclays (BARC)
BCS, -2.54%
led the advance.

In deal news, Vodafone Group
VOD, -0.30%
(VOD) climbed 1.4% after announcing it has agreed to sell its 25% stake in Proximus to Belgacom (000381027), which already owns the other 75%, for 2 billion euros. See full story.

The U.K.'s other main deal involved House of Fraser (HOF), which climbed 1.7% to 146.25 pence after agreeing to be bought by a consortium led by Iceland's Baugur for 351 million pounds, or 148 pence a share.

Separately, House of Fraser said same-store sales in the 29 weeks to Aug. 19 declined 1.6%, a smaller rate of decline than the 2.4% drop in the first 19 weeks of the year.

Corus Group
CGA, +0.01%
(CS) gained 1.6% amid continuing talk of a bid for the Anglo-Dutch steelmaker. A Reuters report cited talk of a possible Russian takeover from either Evraz, which is part-owned by Russian billionaire Roman Abramovich, or Severstal.

In earnings news, financial services group Henderson Group Plc (HGI) gained 11.2% after it announced that first-half net profit rose 50% to 35.5 million pounds.

Henderson said its strategy of focusing on specialist product areas at its Henderson Global Investors division drove 2 billion pounds on net inflows into higher margin products, which more than offset revenue lost from fund outflows at other divisions.

Analysts at Bridgewell Securities said the results were an impressive set of figures, and also highlighted comments from the firm that it could return an additional 150 million pounds to 200 million pounds to shareholders in 2007.

"Overall the figures show the business continuing to deliver on its strategy," The firm said in a note to clients. "The management should be given credit for delivery of value to shareholders."

Rexam
REXMY
(REX), the maker of cans for energy drink Red Bull, was the main index's biggest faller, down 2.1% as it gave back some of Thursday's strong gains. The firm climbed 7.5% in the previous session after posting a 71% rise in first-half net profit to 125 million pounds.

Brewer SABMiller (SAB) ended flat after announcing it would pour $175 million into a new Colombian brewery to keep pace with growing demand in the region and after making a separate $102 million investment in Peru.

And Rank Group Plc (RNK) added 1.1% after it said it has agreed to sell London casino the Clermont Club to BIL International Ltd. for 31 million pounds in cash as part of its strategy to focus on the more mainstream U.K. gaming market. See more global markets coverage.

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